You will have heard the rule: keep a hundred minus your age in equity. At 35 that is 65%.
It is a fair place to start and a poor place to finish. Age is only one of the things that matters. This takes in the other three, then works out what to move and what moving it costs.
About you
Money you need within three years has no business in equity, whatever your age.
An income that swings may force you to sell when markets are down.
What you actually did, not what you think you would do next time.
What you hold now
Shares and equity mutual funds. Count company shares you were given as well.
Fixed deposits, PPF, your provident fund, bonds and debt funds. Leaving out the provident fund is the most common mistake here.
Gold you hold as an investment. Family jewellery you will never sell does not count.
For the sums
The first ₹1,25,000 of long term equity gain each year is free of tax.
Used to work out how much you could fix without selling anything.
What to do
Take ₹2,70,000 out of equity
Your worst gap is 13.5 points, past the 5 point mark.
Your target starts at a hundred minus your age.
Why age alone is not enough
Three people can be the same age and need very different answers.
- When you need the money. This is the big one. Money you need in three years has no business in equity, whatever your age.
- How steady your income is. A salaried person can hold more equity than someone whose business income swings. The second person may have to sell just when markets are down.
- How you behave in a fall. Not how you imagine you would. A 70% equity mix you drop in a panic is far worse than a 50% mix you hold on to.
So the tool opens at a hundred minus your age. Then it moves that for those three. It tells you which ones moved it, and by how much.
The five point rule
Rebalancing is not free. Selling to do it means tax, and possibly an exit charge. So there is no sense fixing a one point gap. The usual trigger is five points, or once a year. Pick one and stick to it. Two things make it cheaper, and the calculator works out both.
The first ₹1,25,000 of long term equity gain each year is free of tax. Think of it as a free allowance. It does not carry forward, so an unused year is gone. The second is simpler. Point your new money at whatever is short instead of selling anything. No tax, no charges, no decision to regret.
Three things people leave out
- The provident fund. If you are salaried it is a large debt holding already. Leave it out and you will think you need far more debt than you do.
- Company shares you were given. They are equity. They also sit on top of a salary from the same firm. Count them honestly.
- The house you live in. Not part of this. You cannot sell two rooms to rebalance.
How asset allocation keeps a plan balanced explains the thinking behind this. The capital gains calculator does the tax in more detail if you are selling several things.
This calculator is for learning. It is not advice for your own case. No fund, company or product is named or backed here. The target mix is a starting point built from four questions. It is not a plan made for you. Tax shown assumes the equity you sell has been held more than a year. It is taxed at 12.5% with 4% cess, after the yearly free limit. Short holdings, debt funds and gold are taxed another way and are not worked out here. Exit charges are ignored. Rules change with every Budget. For advice on your own money, speak to a SEBI-registered investment adviser.